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UPDATED 10/10/2025
Financing & Cash flow are the biggest issues facing business today
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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
"Cash flow is the lifeblood of any business. Without it, even profitable companies can fail." — Richard Branson, Founder of Virgin Group
A/R Finance Funding in Canada: Why It Works for Your Business
A/R finance funding in Canada can make perfect sense for your company. The reason is simple — a receivables purchase facility works. Below are 11 key reasons why Canadian businesses choose this flexible financing solution.
“Over 70% of Canadian SMEs report cash flow as their top challenge.” (BDC, 2024)
When Your Customers' Payment Terms Strangle Your Growth
Your invoices represent completed work and earned revenue, yet your bank account tells a different story.
Every day waiting for payment means another day you can't seize opportunities, negotiate better supplier terms, or simply sleep soundly.
Let the 7 Park Avenue Financial team show you how Accounts receivable funding transforms your unpaid invoices into immediate working capital, letting you operate on your schedule rather than your customers' payment habits.
Understanding the Basics
When customers and banks hold on to their money, cash flow becomes strained. Small and mid-sized businesses face challenges in meeting working capital needs. Unlike large corporations, SMEs have fewer commercial finance options.
What Is a Receivables Purchase Facility?
A receivables purchase facility converts one of your most liquid assets—your accounts receivable—into immediate cash. It’s short-term financing at its best, allowing your business to fund daily operations and support growth.
A/R finance is a form of asset-based lending via Canadian asset based lenders - It’s also known by other names:
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Factoring
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Invoice financing
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Receivables discounting
Comparing A/R Finance to Bank Loans
Bank unsecured loans are often cheaper, but they’re harder to secure. A/R finance works differently—it charges a fee instead of interest. When businesses understand the true cost and benefits, many find it a more attractive working capital tool.
Unfortunately, few companies take time to understand the structure and advantages. A proper understanding can make all the difference.
“Receivables financing can release up to 90% of invoice value within 24–48 hours.”
When to Use Receivables Purchase Financing
A/R financing isn’t a permanent funding source. It’s best used as a transition tool during growth or when cash flow is tight.
This flexibility has made it popular across industries in Canada. Even startups can qualify, making it an accessible non-bank solution.
11 Reasons Why A/R Finance Funding Works
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No New Debt: A/R finance doesn’t add liabilities to your balance sheet.
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Bank Alternative: Ideal when traditional financing isn’t available.
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Simple Application: Quick setup and easy approval process.
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A/R Focused: Approval depends on receivable quality, not company financials -but full ABL facilities can include other assets such as inventory and equipment
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No Collateral: Usually, no outside security is needed.
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Continuous Cash Flow: Sales growth directly drives available funding.
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Concentration Flexibility: High customer concentration can often be managed.
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Minimal Personal Credit Impact: Owner’s credit plays only a small role.
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Improved Profitability: Pay suppliers early to capture discounts.
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Confidential Options: Invoice and collect receivables under your own name.
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Scalable Growth Tool: Funding increases automatically as sales grow.
CASE STUDY: ABC COMPANY
Company Overview:
Toronto-based precision parts manufacturer with 15 employees and $2 million in annual revenue.
Challenge:
ABC Company secured a $400,000 automotive supply contract with 60-day payment terms but lacked $180,000 in upfront capital for raw materials, tooling, and labor. The bank declined to increase their credit line due to rapid growth and strained financial ratios, putting the opportunity at risk.
Solution:
ABC Company partnered with a Canadian commercial finance firm for accounts receivable funding, receiving 85% of invoice values within 24 hours of shipment confirmation. This provided steady cash flow for materials, payroll, and production without disrupting customer relationships.
Results:
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Successfully completed the $400,000 contract on schedule.
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Funding costs totaled $14,000 (3.5%), partially offset by $3,600 in early payment discounts from suppliers.
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Secured ongoing annual orders worth $1.2 million.
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Expanded operations, hiring five new employees and moving to a larger facility.
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Achieved improved financial stability and a higher bank credit line within 18 months, while continuing selective receivables funding for key accounts.
Key Takeaways
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A/R finance funding provides fast access to working capital.
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It converts receivables into immediate cash without adding debt.
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Approval depends on customer credit strength, not your firm’s balance sheet.
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Startups and growing companies can benefit from this flexible tool.
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Non-bank solutions like receivables financing offer speed, control, and scalability.
Conclusion
If your business aims to stay ahead and grow, explore non-bank A/R finance solutions. This proven strategy strengthens cash flow and supports expansion.
Connect with 7 Park Avenue Financial, a trusted and experienced Canadian business financing advisor who can help structure the right funding solution for your needs.
FAQ
Q1: What is accounts receivable funding and how does it differ from a traditional loan?
A: Accounts receivable funding lets you sell unpaid invoices for immediate cash. Unlike bank loans, it doesn’t create debt or require collateral—you’re simply getting early access to money already earned. The funding company advances 70–90% upfront and pays the rest (minus fees) when your customer pays.
Q2: How fast can a business get funds through accounts receivable financing?
A: After approval, funds are typically received within 24–48 hours of submitting invoices. The setup process takes 3–7 business days for due diligence, but ongoing funding happens almost instantly once the account is active.
Q3: Who qualifies for accounts receivable funding in Canada?
A: Most B2B companies qualify if they invoice creditworthy commercial or government clients. Approval depends on your customers’ payment reliability rather than your company’s credit or history—ideal for startups or firms with limited financing options.
Q4: When does accounts receivable funding make the most sense?
A: It’s best for growing businesses facing cash flow gaps or slow-paying customers. Industries like construction, staffing, and manufacturing use it to cover payroll, materials, or supplier costs without waiting for client payments.
Q5: Where can Canadian businesses access accounts receivable funding?
A: Providers operate nationwide—funding is available online from coast to coast. Most transactions are handled digitally, making it easy to access services regardless of your business location.
Q6: Why choose receivables funding instead of a bank line of credit?
A: It’s faster, more flexible, and doesn’t require collateral or personal guarantees. Funding grows automatically with sales volume, unlike bank credit lines that need reapproval and strict financial documentation.
Q7: How much does accounts receivable funding cost?
A: Fees range from 1–5% of invoice value, depending on payment terms and customer credit. While annualized costs may seem higher than bank loans, you only pay for the period funds are used—offering flexibility and speed banks can’t match.
Q8: What types of businesses benefit most?
A: B2B service firms, manufacturers, distributors, and construction companies benefit most—especially those with slow-paying corporate or government clients or experiencing rapid growth and seasonal demand.
Q9: What if a customer doesn’t pay the funded invoice?
A: In recourse funding (most common), you’re responsible if the customer doesn’t pay. Non-recourse funding transfers that risk to the funding company but costs more and is limited to highly creditworthy customers.
Q10: How does receivables funding affect customer relationships?
A: Done properly, it doesn’t. Many arrangements are confidential. Even when disclosed, customers simply remit payment elsewhere. It can actually improve relationships by allowing you to offer longer payment terms without cash strain.
5 Questions About Business Benefits
Q11: How does receivables funding improve cash flow predictability?
A: It turns uncertain customer payments into dependable working capital within 1–2 days. This stability supports payroll, supplier payments, and growth planning without cash flow stress.
Q12: What are the strategic advantages over traditional debt?
A: It adds no balance-sheet debt and grows with sales. You maintain healthy financial ratios and keep credit lines open for other needs, avoiding fixed loan repayments.
Q13: Can it help win larger contracts?
A: Yes. Businesses can take on bigger projects confidently, using funding to cover upfront costs while waiting for long payment terms from large clients or government contracts.
Q14: How does it support growth without equity dilution?
A: You access capital without giving up ownership. Funding scales with revenue, helping expand operations, hire staff, or increase production—all while preserving business equity.
Q15: What operational advantages does it provide?
A: Beyond cash, funders often handle credit checks and collections, reducing admin work and risk. You gain insights into customer payment behavior and enjoy more efficient operations overall.
Q16 What is Securitization
A: A financing company (like a bank) has lots of loans it has made — car loans, mortgages, credit card balances, etc.
These loans are assets, but they’re not easy to sell or turn into cash (they’re “illiquid”).
The company bundles lots of these loans together into a big pool.
Then it creates securities (investment products) that represent small pieces of that loan pool.
These securities are sold to investors.
Why It Helps Everyone:
The financing company gets cash upfront by selling the securities.
That means they can make new loans to more customers.
Investors get a steady income from the loan payments people are making (like car or mortgage payments).
Plus, they can sell their securities whenever they want because they’re liquid (easy to trade).
Types of Asset-Backed Securities (ABS):
They’re named after what’s inside the “bundle”:
Car loans
Credit card debts
Business receivables (money customers owe a business)
STATISTICS ON ACCOUNTS RECEIVABLE FUNDING
- Approximately 80% of B2B transactions in North America involve payment terms of 30 days or longer, creating significant working capital gaps for suppliers
- The global accounts receivable factoring market was valued at approximately $3.5 trillion in 2023 and continues growing at 8-10% annually
- Studies indicate that 82% of small business failures result from cash flow problems, not lack of profitability
- Canadian businesses using invoice financing report 25-40% faster growth rates compared to similar businesses relying solely on traditional financing
- The average Canadian business has 45-60 days of sales tied up in outstanding receivables at any given time
- Invoice financing approval rates exceed 80% for qualified B2B businesses, compared to approximately 25-30% approval rates for traditional bank loans among small businesses
CITATIONS
- Canadian Federation of Independent Business. "Cash Flow Challenges in Canadian Small Business." CFIB Research Report, 2024. https://www.cfib-fcei.ca
- Industry Canada. "Small Business Financing Profiles: Access to Capital Among SMEs." Innovation, Science and Economic Development Canada, 2023. https://www.ic.gc.ca
- Commercial Finance Association. "State of the Commercial Finance Industry: Annual Report." CFA Publications, 2024. https://www.cfa.com
- Bank of Canada. "Business Outlook Survey: Credit Conditions and Financing." Bank of Canada Quarterly Review, 2024. https://www.bankofcanada.ca
- Statistics Canada. "Survey on Financing and Growth of Small and Medium Enterprises." Statistics Canada Business Surveys, 2023. https://www.statcan.gc.ca
- International Factoring Association. "Global Factoring Statistics and Market Analysis." IFA Annual Report, 2024. https://www.factoring.org
- BDC (Business Development Bank of Canada). "Working Capital Management: Best Practices for Canadian Businesses." BDC Financial Guides, 2024. https://www.bdc.ca
- 7 Park Avenue Financial " Finance Factoring Receivable Financing Canada"https://www.7parkavenuefinancial.com/finance-factoring-receivable-financing-canada.html
- Medium / Stan Prokop. "The ‘411’ on Working Capital Finance in Canada — Cash Flow Financing Loans and Solutions"https://medium.com/@stanprokop/the-411-on-working-capital-finance-in-canada-cash-flow-financing-loans-and-solutions-fc156144e329
